Is Morneau’s tax revolt turning into Trudeau’s GST moment?

Hard as it is to believe now, Bill Morneau’s controversial tax reform proposals were designed originally to prevent a populist revolt.

So how did the finance minister manage to arrive at exactly the opposite outcome?

Let’s cast our minds back to the end of March this year, when Prime Minister Justin Trudeau’s government unveiled its second budget. Around that time, the government and Canadians were still getting used to the idea of Donald Trump in the White House and wondering what that meant about the state of politics here.

Inside the media lockup, reporters were asking Finance officials, as well as the minister himself, how the 2017 budget would deal with the kind of middle-class angst that fuelled Trump’s rise in the United States.

When I asked that question, all of them — without exception — pointed to page 199 of the budget document and the five paragraphs under the title, ‘Tax Planning Using Private Corporations.’ The ingredients of this summer’s controversy were all there at the time: the talk of “sprinkling” income, for instance, as well as the declaration that some Canadians are paying less tax than others.

“A variety of tax reduction strategies are available to these individuals that are not available to other Canadians,” Budget 2017 says.

Public-relations disasters are always easy to explain in hindsight. But I don’t recall any red flags being raised last March about how these measures could whip up fury in the land.

Certainly I didn’t predict the reaction. I went back and double-checked my budget-day column for iPolitics just to be sure. Yep, I mentioned the tax-change proposal, but only in passing.

So how did five paragraphs in Budget 2017 turn into a sleeper cell of populist outrage? That’s something that political-communication pros may well be studying now.

“This will be the Trudeau government’s GST,” at least one person in my social media circle has predicted over the past few weeks.

Certainly it’s easy to see the comparison to the goods and services tax, whose introduction in the early 1990s probably sealed the fate of Brian Mulroney’s Progressive Conservative party — reduced to just two seats in the Commons in 1993.

Just as it was difficult for Trudeau’s team to define ‘middle class’ for the purposes of tax reduction, they seem to be faltering here on who exactly are the wealthy people who qualify as legitimate targets for tax increases.

The GST wasn’t the sole reason for that collapse, but it was a big part of it. And Stephen Harper may have clinched his victory, as well as the rebirth of Conservative power in Ottawa, on the strength of his promised cuts to the GST in the 2005-06 campaign.

Here again we have an unpopular tax measure being presented to the voting public as an attempt to modernize the taxation system and make it more “fair” — but in a way which only sounds like “more taxes” to the average Canadian. Again we hear talk about how Department of Finance officials, sealed away in their ivory cubicles, are out of touch with ordinary Canadians. That was a familiar mantra back in the 1990s, too.

Trudeau himself knows the PR toxicity of trying to do anything that would increase taxes. He always says a flat ‘no’ in reply to any calls to raise the GST (even though most economists agree that Harper’s two-point cut to that tax put a massive, unnecessary dent in federal coffers). “Canadians pay enough taxes.” That’s Trudeau’s standard reply to questions about whether he’d put the GST back to pre-Harper rates.

By that, he means that non-rich Canadians pay enough taxes. Wealthy Canadians, on the other hand, ought to pay more — that is what the Trudeau government is saying with this latest proposal.

The problem, frankly, is that it’s not at all easy to draw a clear line between Canada’s rich and everyone else.

This seems to be a theme in Trudeau economics: Just as it was difficult for Trudeau’s team to define “middle class” for the purposes of tax reduction, they seem to be faltering here on who exactly are the wealthy people who qualify as legitimate targets for tax increases. It was fine when Canadians could picture these wealthy people as the Monopoly man with the top hat and the monocle — but what if the rich person under attack is your local doctor? Or a laid-off person over 50, setting himself up as a private corporation to guard the pension and benefits he lost when his company jettisoned him?

Some others have been comparing Morneau’s tax proposals to the gun registry introduced on Jean Chretien’s watch, which rivalled the GST in terms of political toxicity. Again, it’s easy to see why the Conservatives would be keen to make that connection.

What annoyed gun owners most about the registry was the implication that they were somehow breaking the law, or posing a risk to society. What’s annoying some people about these tax proposals — as the Conservatives like to say — is that they’re presenting ordinary people as tax cheats.

This is a remarkably effective technique in political spin — double-demonization, you might call it. Accuse the government of demonizing some Canadians, then attack the government for doing so.

Of course, the tax proposals currently causing headaches for Trudeau and Morneau are nowhere near as substantial the GST, nor do they drive a wedge as deep into Canada’s rural-urban divide as the gun registry did. The Finance Department continues to insist that only a very small percentage of Canadians will be affected by the proposals to make the system “fairer.”

But a government that likes to see itself as communication-savvy — more alert to populist angst than Democrats were in the United States in 2016 — has somehow made a PR mess over taxes as it heads into the second half of its mandate. And it all started with an attempt to beat back populist anger. How’s that for irony?

The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.

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Susan Delacourt is one of Canada's best-known political journalists. Over her long career she has worked at some of the top newsrooms in the country, from the Toronto Star and the Globe and Mail to the Ottawa Citizen and the National Post. She is a frequent political panelist on CBC Radio and CTV. Author of four books, her latest — Shopping For Votes — was a finalist for the prestigious Hilary Weston Writers’ Trust Prize for Canadian non-fiction in 2014. She teaches classes in journalism and political communication at Carleton University.